Superestate uses super contributions to invest in the property market

nvestors keen to get a taste of the property market have been given an opportunity to use their superannuation to invest in part of a home.

With prices in many Australian cities keeping many people, especially young Millennials, out of the market, newly established super fund Superestate is allowing them to get a foot on the property ladder while also catering for their future.

Superestate is the first fund to use this concept and works by investing a percentage of members’ contributions into the Australian property market through the purchase of residential homes in blue-chip suburbs across the nation.

By investing in residential property, members of the fund can physically see where their super investment is sitting and how it is growing over time.

While property is a major part of their portfolio, Superestate does also invest in shares, infrastructure, fixed income and cash just like other funds.

Having launched over a year ago, the fund has secured its first property in the inner city suburb of Stanmore and is actively searching for other properties throughout Australia to add to its portfolio.

CEO Grant Brits said the concept was born in 2016 when he saw how hard it was for people to get into the market, prompting him to find an easier way to invest.

“We found a lot of people don’t understand the ins and outs of super but have better understanding of property,” Mr Britts said.
“It is a lot more transparent as they understand and can see where their money is going.”

Those who do choose to invest will get access to every new property the fund purchases, a move designed to allow for smoother long-term growth if there are falls in the market.

On top of this, purchasing properties around the country will also protect against downturns in certain cities or states, providing more steady returns, Mr Brits added. There are plans to have homes in each Australian capital city by 2020.

“Property as an asset class is a lot less volatile,” he said. “It still has its up and downs but it’s a lot smoother. Residential property tends to come out on top in the long run.”

Over the past 10 years to December 2017, residential property investment generated the strongest gross returns of 8 per cent per annum, according to the Russell Investments/ASX Long Term Investing Report.
  

Growth in capital value isn’t the only way returns are calculated, with any rent collected also going back into the super fund. Once super is accessed, members are essentially selling their stake in the properties.

Real estate commentator and auctioneer Tom Panos said investing in property was a smart long-term move as it was always a strong performer.

“Real estate in general is about playing the long game. People who are nervous about volatility are those buying and selling in a short period. Most are in it for at least a seven to 10 year stretch,” he said.

Sophie Wolinski has always wanted to own a house in Sydney, but high prices have meant she doesn’t see it happening any time soon.

Having been interested in the property market for some time, switching her super over to Superestate meant she could fulfil her dream of putting money into a home, while preparing for retirement through her super.

“I think it’s a really cool way to invest in something you like with money the government makes you save anyway,” she said.
“If you are interested in property or want to get involved in the market it is a really easy place to start.”

The 22-year-old, who currently rents a property in Petersham close to the Stanmore property she has invested in, said it made understanding super easier.

“I can see that I am actually getting something out of my super,” she said.

Before rolling your super into Superestate, you should check with your other funds to see if you will lose any insurance entitlements and if any exit fees apply.